Breaking down Amazon's revenues (2)

Here are the absolute numbers for Amazon's 8 revenue lines.
Note: indicative.
Note: from 14Q1 to 16Q4 Prime grew from ~$600m to ~$1.8b.


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revenue contribution (%)	03-31-2014	30-06-2014	31-03-2015	30-06-2015	31-3-2015	30-6-2015	30-9-2015	31-12-2015	31-3-2016	30-6-2016	30-9-2016	31-12-2016
media: Amazon retail	4,306	3,770	4,013	5,323	3,912	3,425	3,799	5,229	3,988	3,592	3,890	5,216
electronics & other gen merch: Amazon retail	10,252	10,333	10,678	15,807	11,560	11,923	12,758	18,691	14,405	15,139	15,881	22,079
media: 3rd party sellers	735	685	764	996	835	758	883	1,201	1,029	960	1,098	1,459
electronics & other gen merch: 3rd party sellers	1,749	1,878	2,033	2,958	2,467	2,639	2,966	4,294	3,715	4,048	4,482	6,174
Content subscr, Other (ads, cc, other)	207	213	213	320	234	235	249	303	329	344	372	516
Shipping rev	849	889	1,048	1,701	1,299	1,399	1,494	2,328	1,820	2,000	2,154	3,003
Prime	593	568	660	802	843	982	1,123	1,295	1,276	1,435	1,606	1,758
AWS	1,050	1,005	1,169	1,420	1,566	1,824	2,085	2,405	2,566	2,886	3,231	3,536
TOTAL	19,741	19,340	20,579	29,328	22,717	23,185	25,358	35,747	29,128	30,404	32,714	43,741

Breaking down Amazon's revenues

Amazon supplies different revenue breakdowns:

On a quarterly basis:

• Products & Services
• North America & International & AWS
• Media & Electronics & Other & AWS
• Shipping revenues (separately)

On an annual basis:

• Retail products, Retail 3rd party, Retail subscriptions, AWS & Other
• US, Germany, UK, Japan & RoW

Note: you have to be very careful about what is included in all these items, specifically Shipping, Prime and AWS.

This is what we found for 14Q1 and 16Q4:

Disregarding geographic distribution, this is our estimate for 8 different revenue contributors, based on very few assumptions. We have estimates on a quarterly basis, going back to 14Q1. Our main findings for the period 14Q1 - 16Q4 on revenue contributions:

• Retail media (12%): falling
• Retail electronics (50%): almost flat 
• 3rd Party media (3%): almost flat
• 3rd Party electronics (14%): rising
• AWS (8%): rising
• Prime (4%): flat to rising
• Shipping (7%): rising
• Content subscriptions & other (1%): flat to rising

Note that a stable contribution still implies that growth is in line with Amazon's overall 20+% growth.

Vodafone Group deconsolidating India - which markets are to be wholly-owned?

Vodafone Group is deconsolidating Vodafone India. Here are the specs:

• Vodafone India (excl. 42% Indus Towers stake) merges with Idea Cellular (listed; incl. 11.15% Indus Towers stake)
• Vodafone to own 45.1% (after transferring 4.9% to Aditya Birla for INR 39b = $579m cash), Aditya Birla 26.0% (+ option on part of Vodafone's stake to equalise holdings, free float 28.9%, equal voting rights from the start
• EV Vodafone India INR 828b = $12.4b = 6.4x EBITDA, EV Idea INR 722b = $10.8b = 6.3x EBITDA (excl Indus stakes)
• NPV of cost & capex savings (60/40) INR 670b = $10.0b (after integration costs and spectrum liberalisation payments), run-rate savings 140b INR/annum = 2.1b $/annum from yr 4 after completion (NPV INR 700b = $10.5b after integration costs ($2b), excl spectrum liberalisation costs (NPV INR 30b = $0.5b))
• Pro forma net debt YE 2016 INR 1079b = $16.1b = 4.4x EBITDA (pro forma for sale of towers & Indus stake and incl synergies 3.0x EBITDA)
• To close 2018
• Total 400m subs, 35% market share, 41% rev market share
• Name & brands TBA
• Aditya Birla to appoint chair (Kumar Mangalam Birla), Vodafone to appoint CFO, both to appoint CEO & COO
• Break-up fee INR 33b = $500m
• To sell tower assets & Idea's 11.15% Indus stake, Vodafone to sell Indus stake
• Vodafone to deconsolidate Vodafone India immediately (reduces net debt INR 552b = $8.2b; reduces leverage by 0.3 points)
• Vodafone guidance 2016/17 (incl India) unchanged, thereafter to exclude India.

What is left of Vodafone Group?

• Stake (45.1%) in Vodafone/Idea India (listed).
• Stake in 50/50 joint venture VodafoneZiggo in the Netherlands (with Liberty Global).
• Stake in 50/50 joint venture VHA Australia (with Hutchison).
• Stake (65%) in Vodacom in Africa (listed).
• Stake (40%) in Kenya's Safaricom (listed)
• Core Europe markets, wholly owned: UK (in merger talks with Liberty Global), Germany, Italy, Spain.
• Other European markets, wholly owned: Ireland, Portugal, Greece, Romania, CR, Hungary, Albania, Malta
• Non-European units: Turkey, Egypt, Qatar, Ghana.
• 49 Partner Market Agreements.
• MVNOs (Brazil, Chile).

The case for further Liberty Global mergers is still clear, esp. in markets with overlap (UK, Germany, Ireland, Romania, CR, Hungary). But there are other, local candidates. At the same time, global presence (in IoT and via PMAs) is crucial to Vodafone's ambitions. Still, it is unclear how the Group wants to manage its portfolio, which markets are core markets, and which are to be wholly owned - if any.

Vodafone & Liberty Global extract cash from & load debt on VodafoneZiggo

Observations from the establishment of the VodafoneZiggo joint venture:

• Cash was extracted & debt was loaded by the parent companies. Future annual shareholder charges have been raised.
• Leverage a la Liberty Global (4.5-5.0), even though mobile (with structurally lower margins & growth) is a large part of the business.
• Vodafone comes first in the name & supplies the CEO, even though Ziggo is larger.
• According to rumors, T-Mobile paid €90m for Vodafone Thuis, which had negative FCF of €73m in the 12 months to 20160930 only. The JV loses 150k subs to the KPN camp (T-Mobile NL & KPN Wholesale) as a result of the sale of Vodafone Thuis. Good deal for both.
• IPO possible from 20200101, sale from 20210101. Any acquirer can save from cutting the annual shareholder charges.

A staged retreat from NL, by both Vodafone and Liberty Global, seems far from unlikely. If both agree, it can be done even before 20210101.

VodafoneZiggo established on last day of 2016 with EUR 10 billion gross debt

The Vodafone Group and Liberty Global closed the creation of their 50/50 JV on the last day of 2016, calling it VodafoneZiggo. Here are the details:

• 7.1m HP, nationwide 4G, 9.6m fixed (4.0m video, 3.1m BB, 2.5m fixed voice) + 5.2m mobile RGUs at 160930
• rev -12 mo EUR 4b, gross debt EUR 10b at 160930
• synergies NPV EUR 3.5b (unchanged; capex/opex run-rate savings EUR 210m by 2021 (reduced from 280m), Vodafone Thuis sold (FCF -73m), integration costs 280m (down from 350m due to Vodafone Thuis sale), rev synergies >= 1b)
• shareholder charges for services provided increased (EUR 182m in 2015, EUR 211m in 2017E (97 for Liberty, 114 for Vodafone))
• Vodafone to receive EUR 0.6b cash, Liberty Global to receive EUR 2.2b cash, based on recapitalisation & equalisation payment Liberty to Vodafone (EUR 0.8b, original estimate EUR 1b; down due to increased net debt at Ziggo)
• plans predictable dividend, recapitalisations, minimum cash balance, leverage 4.5-5.0
• brands Vodafone & Ziggo
• plans converged propositions
• partners retained cash from subsidiaries since 160215 (JV announcement): EUR 500m from Ziggo, EUR 300m from Vodafone NL
• not to be consolidated by parents (equity affiliate or associate)

Gross debt EUR 10 billion compares to KPN's EUR 8 billion.

Vodafone Thuis (sold to T-Mobile NL) for the 12 months to 160930:

• rev EUR 53m
• EBITDA EUR -29m
• capex EUR 44m

Analysts and arbitrariness

Certain recommendations appear questionable (whether sell-side or buy-side), due to arbitrariness. The reasoning is in three steps:

1. The analyst sums up an arbitrary number of positives. This is a very selective process, which includes downplaying the negatives.
2. All these issues are based on public information and hence discounted into the share price.
3. The analyst could argue that his views are superior to those of the rest of the investment community, and hence these issues are either under-discounted or over-discounted. What follows, is a buy or a sell recommendation.
4. His superiority could be determined by looking at his past recommendations.

Analysts use arbitrariness to help them achieve their own business goals.